Elimination of double taxation: residence-based tax credit or deduction provided to offset foreign tax paid under the treaty.

Elimination of double taxation is achieved by allowing residents of China a credit for Indian tax on income taxable under the Agreement-limited to the Chinese tax on that income-and by allowing residents of India a deduction for tax paid in China up to the portion of Indian tax attributable to that income. Dividend credit rules require consideration of tax paid by the Indian distributing company, and "tax paid" includes amounts foregone due to domestic tax reductions, exemptions or incentives.

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